Earbud value...

[Dirty Dan]

...is shocking! Lately I've had people add me on my friends list giving me offers for my earbuds. I knew there would start to be an economy once all this stuff started going down but I'm still surprised by this. I've gotten offers to trade $50 games for it (and I dont think it was a scammer either).

According to this site, my earbuds are worth over 30 bucks. (I also might be behind the curve knowing that site exists, but interesting...)
http://tf2finance.com/

I'm considering treating this like an investment - it didn't cost me anything and it would be a fun exercise in trying to maximize value.

Possible positive effects on value:
Increase in player base due to F2P
Time elapsed since 1-time availability of earbuds

Possible deleterious effects on value:
Decline in game popularity
Unknown if item will become available again

Just to be clear, I really don't care that much, I like the earbuds, they're fun so worst case their worthless and I still have them. But if I was trying to maximize value, I think I'd look at their value trend over the next year or so and see how they do. The game clearly has a lot of staying power, and I've only recently had unsolicted offers from strangers on them. I'd bet on the rarity maximizing the value over the player base declining such that demand for these items decreases.

Anyway, I'm sure this kind of junk is old news to WoW players who have been dealing with this kind of thing since 2007, but it's novel to me.

[Zork Nemesis]

Nobody ever bothers me for mine, but then again I turn down friend requests from people I don't know and have it set to auto-decline trades from non-friends. If people are bothering me for them, I don't know that they are. And on that note, nobody ever bothers me for my Max Ears, Maul, or other valuables, though I did have one guy try to buy my #37 demo weapons. Then again I don't jump from pub to pub flaunting this stuff either.

For the most part, Earbuds have been a staple trade item for big ticket trading for a while now. They generally go for a good handful of keys and are often the currency for buying the really sought after rare stuff like Max Heads, Soldier Medals, HOUWARs, and the like. There's also been talk about how people bought up crazy amounts of Earbuds for elaborate money laundering schemes, which is probably one of the main reasons they incorporated Steam Guard into the trading system.

[Larry]

Yeah, people will try that. Though with the people offering you games, they probably got them on sale for a really low price and you could probably get better. I think at one point around 5 or so months ago they were up around 40(?) bucks. They seems to be stable, but then again people want 4 ref for keys.

[Boss Llama]

Earbuds currently trade for 26-27 keys.

They sold for that before the marketplace, and they still sell for that, which means they have doubled in cash value.

If you sold your buds for straight keys, then marketplaced the keys for $2.15 (approximately the high that will sell - with Valve fees, it's $2.47), you would currently get around $56-$58 for them. The usual cash price if buying directly has been around $30-$35 of late, though I haven't checked in the few weeks.

Personally, I anticipate their value, and the value of anything else priced in keys, to go down - the market can't withstand an across the board doubling in price - but I may be wrong. Either way, they're valuable.

[Dirty Dan]

the market can't withstand an across the board doubling in price

Why is that? What specific forces on supply and demand?

[Jesus_Faction]

i traded my buds over a year ago for a 35 dollar game on steam.

[Plinko]

I think it's time for a contest!

[Boss Llama]

the market can't withstand an across the board doubling in price

Why is that? What specific forces on supply and demand?

I'm no economist, but it's not too hard to imagine the trouble we would have if we woke up tomorrow, and the price of everything in the world had doubled - food, gas, rent, clothes, etc - but income remained identical. What's going on is people are spending two dollars to get a one dollar bill, with which to buy something from the very people they gave the two dollars to in the first place. That merchant is then re-selling the same one dollar bill for two more dollars. Somebody who knows the jargon can insert "specific forces."

Basically, here's what I see/anticipate in the trade market:

1) Pricing in the trading market is driven by a tiny proportion of the overall TF2 population - die hard cash traders - who have a significant proportion of all the most desirable/valued items in their possession.
2) The basic non-cash unit of pricing for items is the key.
3) There have been a certain number of keys floating around in the trade market for quite some time, mostly circulated amongst traders at what I'll call a "trader price" (around $1.20)
4) The gradual outflow of keys from the trade market, through their use to open crates, has been offset by the gradual inflow to the trade market from non-traders who bought them from the Valve store for $2.49, and spent them with traders in exchange for desirable items the traders control.
5) The community market has created a situation where any person who purchases keys for the "trader price" can earn the equivalent of 75%+ interest in less than 24 hours by turning around and selling the keys on the market for just a few cents less than Valve sells them for ($2.15 income to the trader).
6) Inflow of keys purchased at the Valve price is extremely unlikely to keep up with the accelerated outflow of keys from traders pursuing easy money in this manner.
7) Because pricing in keys of other objects hasn't changed to reflect increased key prices, a trader can infinitely loop his key purchases, buying other items to sell for more keys (still being valued at the equivalent of the trader price) which he can again sell at the market price, to buy items... repeat ad infinitum
8) This will drain the "trader price" keys from the marketplace, and the cash traders who have been circulating keys amongst themselves to balance the exchange of other valuables will find themselves harder and harder pressed to acquire keys at the prices they expect.
9) The result will be that people either have to lower the price of objects in keys, or raise the cash price of objects, in order to keep a massive discrepency from destroying the system. For example, looking on outpost, I could buy a set of buds for between $30 and $35, or I could buy it for 27 keys, which would cost around $67, thanks to the price change due to the community market. Prior to the community market, 27 keys was the same as $30-$35.
10) Looking at the long term pattern of the market, cash prices have been pretty much stable, even as in game prices flexed. When Bills' Hats were 4 keys, they cost $10-$12. Presently with them at 8-10 keys, they are still $10-$12. The cash prices on these items are set by real world supply and demand, because they're dealing with real world money - it's what people are willing to pay. It's only the in-game non-cash price that has significantly changed over time, reflecting the fluctuating key market. It stands to reason that real world prices will continue to be the less variable thing here, and that the in-game pricing will again adjust to reflect the real-world value of the keys being used. That would currently imply that the in game value of things, in keys, will drop to roughly half its current level. We're on a bubble.

The real test will be if/when the community market is opened to any and all objects. Once things like Bills and Buds can be directly exchanged for cash through Valve, the traders will lose a great deal of the advantage they currently have from out of game markets, self-supporting "trust" networks that prevent new traders from joining, and the sort of day-trading that is the current norm.


n.b. There has been only one real reaction I've seen in in-game key values, and that has been the price of keys when purchasing with refined metal. When cash trading first really hit the scene, keys were priced at 2.33 ref because refined was around $1.10 each, and 2.33 ref most closely approximated the $2.49 cash price of a key. As the traders acquired more and more keys, and sold them for less and less, more and more refined metal was also created (from the gradual but infinite supply of weapons), and they dropped in value roughly together, and the 2.33 ref price remained in place for around 2 years. With the released of the community market, the price in ref has leapt to 3.33, and sometimes higher, as key cash prices jumped. The value of keys for buying other things, however, has remained the same. While I can't prove the reason, I would bet money that it's because this arrangement benefits the traders that control the market. People have to pay more for what they want on both fronts - they have to pay more for the keys, and they have to pay more keys than items are worth.

[Plinko]

7) Because pricing in keys of other objects hasn't changed to reflect increased key prices, a trader can infinitely loop his key purchases, buying other items to sell for more keys (still being valued at the equivalent of the trader price) which he can again sell at the market price, to buy items... repeat ad infinitum
This will drain the "trader price" keys from the marketplace, and the cash traders who have been circulating keys amongst themselves to balance the exchange of other valuables will find themselves harder and harder pressed to acquire keys at the prices they expect.
9) The result will be that people either have to lower the price of objects in keys, or raise the cash price of objects, in order to keep a massive discrepency from destroying the system. For example, looking on outpost, I could buy a set of buds for between $30 and $35, or I could buy it for 27 keys, which would cost around $67, thanks to the price change due to the community market. Prior to the community market, 27 keys was the same as $30-$35.
10) Looking at the long term pattern of the market, cash prices have been pretty much stable, even as in game prices flexed. When Bills' Hats were 4 keys, they cost $10-$12. Presently with them at 8-10 keys, they are still $10-$12. The cash prices on these items are set by real world supply and demand, because they're dealing with real world money - it's what people are willing to pay. It's only the in-game non-cash price that has significantly changed over time, reflecting the fluctuating key market. It stands to reason that real world prices will continue to be the less variable thing here, and that the in-game pricing will again adjust to reflect the real-world value of the keys being used. That would currently imply that the in game value of things, in keys, will drop to roughly half its current level. We're on a bubble.

The term for #7 is arbitrage, the exploitation of a difference in pricing between two markets. In this case, in the trade market keys were selling for a much lower price than the cash market. There were two possible explanations for this fact (or a combination) - either the cash market price was artificially inflated (caused by the Mann Co. Store's monopoly on cash price keys), or the trade market was depressed by transaction costs (poor mechanisms for matching buyers/sellers, trust/transaction issues caused by an inability to trade cash for items and thus minimal market-making activity).

The opening of the Community Marketplace should eliminate the major forces that split the market up and where the price settles will better tell us the market value of keys and thus indirectly the market value of items. Valve's Mann Co' store price acts as a ceiling, the value should not rise above $2.49 in total cost to the purchaser since they would then just purchase them from the store, of course, but it cannot act as a push up on prices as long as there is supply (and it seems to me there is a rather significant supply out there).

I think you're likely making a significant error in evaluation of the market in assuming that trader market prices were reflective of real supply/demand signals and underestimating the impact of transaction costs had in depression of the cash price of items in general. It seems to me, based on anecdotal observation, that there are a lot of people who wished to buy items that simply were not willing or able to invest the time and effort to engage in the items for money market at all - that depresses prices.
The community marketplace opens up significant additional demand by reducing transaction costs - so prices will probably rise absent an increase in the supply of items. So far, it looks like the supply isn't changing, so prices should rise. They may fall back a bit, but I bet they won't fall much more.

I'm confident enough in this that I'd wager that in six months, absent a significant decline in TF2 popularity or a change in the Mann Co store price, that the Community Market Price of keys will remain above $2.25.

[Masakari]

i traded my buds over a year ago for a 35 dollar game on steam.

Same. Yeah ago earbuds turned into Costume Quest and Dead Rising 2: Off The Record.

If people are dumb enough to give me real money/physical items for a virtual item, I am not one to say no.

[Boss Llama]

-snip-

I agree entirely with almost everything you say! I think key cash price will go up to, and remain at, as close to $2.49 as possible. The prices I'm talking about dropping aren't the cash price of keys, it's the number of keys required to buy other items that are not currently available on the community market.

For example, Bills Hats used to cost 4-5 keys to buy, or $10-$12.

Presently, Bills Hats cost 8-10 keys to buy, or $10-$12.

Given the present situation, I would expect Bills Hats to drop back down to 4-5 keys to buy, and remain around $10-$12.*

*The reason for this is that while keys have been made available on the Community Market, rare items paid for in keys have not (except Genuines). Things like Bills Hats aren't available to the bigger market yet, so are limited to the same group of cash buyers as before, and are maintaining their same cash prices. The supply-demand ratio has only changed for one of the two items in the exchange, and that item (keys) has increased in value, while the other item (Bills) has remained the same. If/when the community market does open more broadly, that's when the much larger base of buyers would be available to drive prices up again. If/when they fully open up the market, I would agree completely with you about the supply/demand issue, as the number of potential buyers on certain rare items will increase far more than the number of potential sellers.

Unless and until that market expansion occurs, I think we're on a bubble. Things that are priced in keys are what have always adjusted to key cash price, but in the past, that cash price has always been going down. This is the first time there has been a sustained upward pressure on the cash price of keys, and I'm looking for the correlating drop in the price of objects in keys. So far it hasn't happened, and I believe that's related to traders artificially maintaining high prices - the arbitrage you defined (thank you for that term) - for as long as they can before the buyers catch on to what's going on. If a market expansion happens fast enough, they may be able to bare-face their way through the gap, like they are now. If Valve works on Valve Time, however, I think a market correction is inevitable.

---

I need another vocab lesson here, on the term "transaction cost." Is that is simply the technical term for any barrier to entry in the market?

The out of game cash markets do have a couple barriers to entry, that's for sure. A paypal account has a comparable, if not lower, actual monetary fee on it than the 15% Valve charges for TF2 items, so that isn't it, but that's not the issue. The barriers to entry are based on trust. Many players do not trust others enough to be willing to buy things in a market where they have to send payment and then wait for the item. Traders, in return, have established additional barriers by creating their own self-referential "reputation" (rep) system and websites, which reinforce the paranoia of non-traders about trading with anybody but the prime movers of said sites. Without significant rep built up on these places, a person is not considered trustworthy, but it's exceedingly difficult and expensive to build up reputation, because only a few folks will trade with you without it - you can't get rep w/o trading, and you can't trade w/o rep. Valve's jump in to the pool should smash this barrier of trust and separation of markets for those items that are available in both places, but does nothing for those items still only available on the cash market. In an expanded market I'd imagine there will still be some differences, due to the desirability of "real life money" versus "Steam wallet funds," but there should be some major adjustments to pricing on one side or another.

[Plinko]

'Transaction costs' (not fee) are burdens on a transaction in addition to the nominal value of the exchange - including actual fees but also including time/energy/effort/risks/opportunity costs to make the transaction occur. In cash for item trading - those would be things like the burden of searching for a suitable partner, conversion/valuation difficulties (throwing in metal or oddball items to even out the value or the loss someone incurs to make the trade without the balancing), the risk of loss (getting scammed, for example), and also things like exchange fees or taxes on the paypal/bitcoin exchange.

My guess is that the cash for items demand is also transferable in a proportional manner to items the same as it is for keys - ie that the market depression applies roughly equally to non-key items as it does to keys. Probably not identical but in the same ballpark. I would hazard that the key to item rates will not fluctuate that much at all in the medium term, perhaps 10-20% but certainly not 30-50%.
Part of the change will be a firming up of exchange values - nothing will have a max/min gap like 10-12 anymore. It will be narrow to something like 10-10.5, so maybe a Bill's will settle in the 9-10 range and then start rising from there.

There are always going to be more keys, but there won't be any more Bill's or Buds, so until the market starts to shrink or be otherwise altered, the price of those items should gradually rise, possibly after a period of adjustment as the number of other items increases.

The important thing to know is that opening markets should lead to the decline in arbitrage opportunities and thus the profits available to middlemen. Those who have a lot of keys and other items to sell can now reap the higher prices available - but no one will get the chance to buy at such depressed prices and sell at current rates again (absent a shock of some kind). In this way, eBay has significantly raised the wholesale prices of many antiques but also made it harder to bargain hunt and make money at estate sales.

[Boss Llama]

Awesome, thanks

The current gaps on stuff like a Bills are based on if they're painted or not. An unpainted Bills is 8 keys/$10, while a white or black Bills is 10 keys/$12. The middle ground is occupied by Gold, Team Spirit, and occasionally bright pink or lime painted Bills. The prices are still actually pretty set, it's just that paint is variable.

I do wish I had some money to play with right now, because I would seriously buy (for cash) some stuff to hold on to, to trade out for keys, games, or other materials down the road

[Dirty Dan]

The term for #7 is arbitrage, the exploitation of a difference in pricing between two markets.

Great word. Also great discussion.

[Boss Llama]

Interesting thing going on in the last couple days - for the first time in many months, the in-game price on Bills Hats has moved... and it's slipped downward! The change is very slight - white bills now going for 9-9.5 keys, and black bills for 9.5-10 keys, but it's a move. Also, TS Bills are no longer relilably fetching 9 keys - they seem to be going for 8.5 or so. Considering that B/W have been solidly at 10 keys for quite a long time, and TS at 9, and nothing has occured to make them less desirable, I'm watching with curiosity. I haven't seen any of the sellers mention why they're offering lower prices, but it's been almost across the board. It could be coincidence, it could be caused by something else, it could just be a completely random variance - the baseline 8 key price hasn't changed. Still, I'll be watching!